Property Law – Building Contracts

[vc_row][vc_column width=”2/3″][vc_column_text]Many Australians dream of building their own home. With the ever increasing prices of established homes many people are attracted to “house and land” packages as an alternative way of realising their dream.

Broadly speaking there are two main types of building contracts for the construction of residential dwellings. They are a cost plus contract or a fixed price contract.

A cost plus contract is one where the builder is to be paid for the cost of the building work plus a profit margin. A fixed price contract, as the name suggests, provides for a fixed sum to be paid to the builder for the construction of the home. Generally we would recommend against the entering into a cost plus contract where possible as it is difficult for the homeowner to ascertain with any precision what the final price payable to the builder will be. A fixed price contract is preferable but that is not to say it is in itself perfect. There can be many traps for the inexperienced when entering into a building contract.

It is vitally important for a building contract to sufficiently identify the works that are to be carried out by the builder. Typically the building works are set out in the building contract. It is equally important for the owners to ascertain exactly what works or materials are excluded from the building contract. Sometimes it is more important to know what items are excluded than included. Excluded items should be clearly set out in a reference schedule attached to the tender document or the building contract.

Although a fixed price contract provides for a lump sum agreed upon for the construction of the house, the price, ironically, may not be fixed. Such contracts may impose an obligation on the owner which will involve them in additional expense. This could include the provision of a survey report, the requirement to provide the builder with the site in an all-weather access condition, rectification of any hidden site conditions and pay for any increase in tax or statutory charges. If the owner fails to comply with these obligations then the builder will attend to same and add the costs to the lump sum fee initially agreed upon.

Brydens Lawyers are the building contract experts and before entering into any building contract contact Brydens Lawyers for a review and advice so as to ensure that the terms of the building contract accord with your requirements.